A controversial lawsuit filed by a nonprofit insurer against the Obama administration could end up reverting up to $5 billion of taxpayer money to participating carriers, legal experts say.
Executives with Health Republic Insurance of Oregon, one of the 23 original insurance cooperatives established under the Affordable Care Act, charged the White House with failing to pay out through the risk corridor program despite the law’s requirements. It has sued on behalf of all insurers participating in the program, and seeks $5 billion in restitution.
According to Timothy Jost, a law professor at Washington and Lee University School of Law, if the Obama administration settles, the money would come from the Judgment Fund – an indefinite appropriation established by Congress and administered by the Treasury Department.
“In this case, the argument is the statute requires the government to put for the risk corridors, but Congress refused to appropriate the money to do that and therefore the court is going to have to award a judgment since the administration, under the direction of Congress, is violating the law,” Jost told The Daily Signal.
“And therefore the money has to come out of the Judgment Fund that the Court of Claims has to award a judgment against the federal government, which is appropriated money.
The suit comes after Congress failed to deliver on promises of billions of dollars of support to the co-ops, which many had counted on in order to remain financially solvent. Absent of that funding, several co-op CEOs said they had no other choice but to fold.
Republican lawmakers, meanwhile, have criticized the risk corridor program as an “insurer bailout” and several believe the suit may end up providing the White House with a way to bypass the funding restriction imposed by Congress.
“What the insurers are doing is tricky. It’s an end run,” Seth Chandler, a law professor at the University of Houston, told the newspaper. “It’s an end run around congressional prohibition. It’s saying, ‘Okay, you said the Treasury couldn’t spend money. You’ve broken your promise, and because you broke your promise, we’re going to sue you for breach of contract.”
The Obama administration has not signaled an official position with regard to the case, but both Chandler and Jost agreed that the Justice Department may end up settling the case with insurers.
